Cash Back Credit Card Basics
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Wouldn't it be great if someone offered to give you a rebate each month of 2% to 5% of all your cash purchases? Well, credit card companies do just that. If you pay for most of your purchases with a cash back credit card you can accumulate hundreds of dollars in rebates over the course of a year. Not a bad way to pickup some extra spending money!
Cash back credit cards are some of the most popular credit cards with consumers today. A typical cash back card might offer 3% rebate for grocery store and pharmacy purchases and 1% cash back for all other purchases. Some cards offer 5% rebate on travel, gas, home, restaurants, and movie purchases. So lifestyle can be a consideration when selecting a cash back credit card. Cash back offers are as numerous and varied as the credit offers themselves. Some things to think about:
While some cards allow unlimited cash back earnings over the course of a year, many do not. Many cards put a limit on how much you are allowed to earn. For instance, some cards only pay cash back on the first $1200 you charge for the year. Clearly limits can be a big disadvantage. Review these limits before signing up.
Often times cash back cards target certain kinds of purchases for their largest rebates. For example 5% cash back for gas or 3% cash back for grocery and pharmacy purchases with 1% rebate on all other purchases. Determine which credit cards offer the highest cash back rebate percentage for items you frequently purchase. Getting 5% back on grocery and gas purchases can be significant for most families. Sometimes it pays to have more than one cash back credit card to get the maximum rebate on all of your common purchases.
How is the rebate redeemed
This can vary from one card to another. With some credit cards you will automatically receive a rebate check at the end of the year. Others will add the monthly rebate amount directly to your credit card which is probably the best way. With some cards you have to request the rebate after some incremental rebate amount has accumulated. Don't forget to make the request or you may lose out.
A common cash back strategy is to have two or more cards that target the very highest rebates for different types of purchases. One card may rebate 5% on gas and groceries and another card may yield 5% on restaurant and travel purchases. As always, consider fees and interest rates when examining offers.
Cash back and rewards cards in general can have higher rates of interest attached to them than other types of cards. These cards are best suited for people who tend to pay off their balance in full each month. Many cash back credit cards are available without annual fees.